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Sept. 9 --Unum Life Insurance Company of America didn't abuse its discretion by considering e-mails and documents provided by an acquaintance of a long-term disability benefit plan participant in making its decision to terminate the participant's benefits, the U.S. Court of Appeals for the Fifth Circuit ruled Sept. 6 (Truitt v. UNUM Life Ins. Co. of Am., 2013 BL 238156, 5th Cir., No. 12-50142, 9/6/13).

In 2007, an acquaintance of the participant contacted Unum seeking compensation in exchange for evidence that the participant wasn't disabled and had obtained disability benefits under false pretenses. Although Unum didn't compensate the acquaintance, he provided more than 600 pages of e-mails that cast doubt on the participant's state of disability.

Judge Stephen A. Higginson, writing for the court, found that Unum didn't abuse its discretion in considering these e-mails. Reversing a ruling of the U.S. District Court for the Western District of Texas, Higginson wrote that Unum didn't have an affirmative duty to investigate the accuracy of the e-mails or to consider their source. Further, Higginson wrote, Unum's decision to terminate the participant's benefits was based on “concrete evidence” and wasn't an abuse of discretion.

Disability Benefit Dispute

Terri Truitt worked as a litigation partner for the law firm Mayer Brown Rowe & Maw. Citing continued pain, numbness and lack of mobility, Truitt left her position in 2002 and began receiving long-term disability benefits from an employer-sponsored plan administered by Unum.

In August 2007, a man identifying himself as an acquaintance of Truitt's named Andrew M. Thomas contacted Unum and asked for six times the amount of Truitt's monthly benefits in exchange for evidence demonstrating that she had obtained disability benefits under false pretenses. According to the Fifth Circuit, Unum responded that it “does not pay for fraud-related information” but that Thomas was “free to call” with any relevant information. He did so, sending more than 600 pages of e-mails over a two-year period. The e-mails presented evidence of Truitt engaging in activities allegedly inconsistent with her disability, including traveling, dancing, cleaning and performing legal work. Further, some of the e-mails “implied that Truitt knowingly was misleading Unum,” the Fifth Circuit said.

Unum terminated Truitt's benefits in October 2009, explaining that the information provided by Thomas contradicted statements Truitt made in the course of her claim for benefits. Unum upheld its decision on appeal and sought more than $1 million in overpaid benefits. Truitt filed suit, and the district court ruled in her favor, finding that Unum's reliance on the evidence provided by Thomas was procedurally unreasonable. Unum appealed.

District Court Erred

On appeal, the Fifth Circuit said that procedural unreasonableness “is a factor” for courts to consider in determining whether to give more weight to a plan administrator's potential conflict of interest. However, the Fifth Circuit said that procedural unreasonableness isn't “an independent basis on which a district court can find an abuse of discretion.” To that end, the district court erred by failing to indicate “whether its finding of procedural unreasonableness was an independent basis for holding that the plan administrator abused its discretion,” the Fifth Circuit said.

Moreover, the Fifth Circuit found that the district court erred by considering Unum's alleged failure to investigate “the accuracy of the information it gleaned from the emails” as a factor in finding procedural unreasonableness. The Fifth Circuit said that Unum “did not violate its duty to investigate” because “no such duty exists.”

Further, the district court found that Unum erred by failing to “consider the source of evidence” provided by Thomas. According to the Fifth Circuit, this finding was also in error, because “the parties do not identify, and we could not find, a case in which we imposed on a plan administrator an affirmative duty to consider the source of evidence.”

The Fifth Circuit went on to conclude that Unum didn't abuse its discretion by considering the e-mails provided by Thomas. According to the Fifth Circuit, Truitt didn't introduce any evidence that the e-mails “were forged or hacked,” or that “at any point when the emails indicated that she was abroad, she instead was in the United States.” Further, the expert reports submitted by Truitt “did not identify any specific discrepancies suggesting that the emails were inauthentic or compromised,” the Fifth Circuit concluded.

Given these e-mails and other evidence in the record, the Fifth Circuit said that Unum's decision to deny benefits was supported by “concrete evidence” and therefore not an abuse of discretion.

With respect to Unum's counterclaim for more than $1 million in allegedly overpaid benefits, the Fifth Circuit found that the district court improperly applied Texas law--instead of federal common law--in rejecting this counterclaim. The Fifth Circuit reversed the district court's holding with respect to Truitt's claim and vacated and remanded the district court's ruling on Unum's counterclaim.

Judges W. Eugene Davis and James E. Graves Jr. joined in the court's decision.

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